The Great Western MacHinery Company v. Smith

• Decision Date: 08 June 1912
• Docket Number: 17,522
• Citation: 87 Kan. 331,124 P. 414
• Parties: THE GREAT WESTERN MACHINERY COMPANY, Appellee, v. J. C. SMITH et al., Appellants
• Court: Kansas Supreme Court

124 P. 414

87 Kan. 331

THE GREAT WESTERN MACHINERY COMPANY, Appellee, v. J. C. SMITH et al., Appellants

No. 17,522

Supreme Court of Kansas

June 8, 1912

Decided January, 1912.

Appeal from Saline district court.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. PENAL STATUTE -- Foreign State -- When Enforceable in Kansas. The rule that a penal statute will not be enforced outside the territorial jurisdiction of the legislature enacting it applies only to such statutes as are entirely penal, their sole purpose being to inflict punishment for the violation of a law, for the public benefit, and not to those which are in part compensatory, the violator being required to make good to an individual a possible loss having some connection with his default.

2. PENAL STATUTE -- Same. A statute requiring a corporation to file an annual statement showing its financial condition, and making its officers individually liable for its debts in case of default, is not purely penal.

3. PENAL STATUTE -- Same. The enforceability of such a statute in another state is not affected by the fact that the courts of the state enacting it have characterized it as penal in connection with the rule of strict construction and with the application of a statute of limitations upon actions to recover a penalty.

David Ritchie, for the appellants.

Burch Litowich & Mason, for the appellee; Bartels & Silverstein, of counsel.

OPINION

MASON, J.:

The Great Western Machinery Company brought action against J. C. Smith and D. E. Berger. The petition alleged these facts: On April 1, 1909, the plaintiff sold goods to the Abe Lincoln Mines and Milling company, a Colorado corporation, for which payment has not been made. By a Colorado statute (Laws of Colo. 1901, ch. 52, § 11, Rev. Stat. of Colo., 1908, § 911) all such corporations were required within sixty days after the first day of January in each year to file with the secretary of state a report showing among the other matters the names of its officers and directors and its financial condition. Such a report was not filed in 1909 until April 17. The defendants were at the time directors of the corporation. The statute further provided that if a corporation failed to file such a report within the time prescribed, all its officers and directors should be individually liable for all its debts contracted during the preceding year and until the report should be fried. Upon these grounds the plaintiff asked judgment against the defendants for the amount of its claim against the corporation. A demurrer to the petition was overruled, and the defendants appeal.

The defendants maintain that the present action will not lie in this state, because the statute invoked is penal in its nature, and for that reason a liability under it can not be enforced elsewhere than in Colorado. The statute is beyond doubt penal in a certain sense. And it has often been broadly stated that a penal statute has no extra-territorial force, and will not be executed by the courts of another state or country. A distinction has been made, however, between statutes which are entirely penal, their sole purpose being to punish a violation of the law for the public benefit, and those which are in part compensatory, the violator being required to make good to an individual a possible loss having some connection with his default. It is universally held that statutes of the former character can be executed only by the sovereignty enacting them. But by the weight of later authority, and as we think by the better reason, actions may be maintained anywhere to enforce the liability to an individual, created by statutes of the latter kind. Cases on both sides of the question are collected in 1 Cook on Corporations, 6th ed., § 223, pp. 586-588; and in 3 Clark & Marshall on Private Corporations, § 833p, where the authors say:

"It is a general principle of international law that 'the courts of no country execute the penal laws of another,' and this is true as between the different states. Many of the courts have held that this principle applies to statutes of a state imposing upon the directors of a corporation personal liability for its debts as a penalty for failing to file a report of the company's condition, or to do other acts required of them by law, or for doing acts prohibited; that such statutes are penal statutes, within this principle, and that they will not be enforced in the courts of other states. The more recent cases, however, show that this doctrine is erroneous and can not be sustained; that the rule of international law that the penal laws of one state or country will not be enforced in another state or country applies only to penal laws in the strict sense, that is, laws imposing a punishment, pecuniary or otherwise, for offenses against the state; and that a statute imposing upon directors a liability for corporate debts is not a penal law in this sense."

The leading case on the subject is Huntington v. Attrill, 146 U.S. 657, 36 L.Ed. 1123, 13 S.Ct. 224, where it was said:

"It will be necessary, in the first place, to consider the true scope and meaning of the fundamental maxim of international law, stated by Chief Justice Marshall in the fewest possible words: 'The courts of no country execute the penal laws of another.' The Antelope, 23 U.S. 66, 10 Wheat. 66, 123, 6 L.Ed. 268. In interpreting this maxim, there is danger of being misled by the different shades of meaning allowed to the word 'penal' in our language. In the municipal law of England and America, the words 'penal' and 'penalty' have been used in various senses. Strictly and primarily, they denote punishment, whether corporal or pecuniary, imposed and enforced by the state, for a crime or offense against its laws. . . . But they are also commonly used as including any extraordinary liability to which the law subjects a wrongdoer in favor of the person wronged, not limited to the damages suffered. . . . The question whether a statute of one state, which in some aspects may be called penal, is a penal law in the international sense, so that it can not be enforced in the courts of another state, depends upon the question whether its purpose is to punish an offence against the public justice of the state, or to afford a private remedy to a person injured by the wrongful act. . . . The provision of the statute of New York, now in question, making the officers of a corporation, who sign and record a false...